ORLD BANK PROJECTSYEAR ENDED 21 DECEMBER 2017

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Supreme Audit OfficeGovernment of Islamic Republic of Afghanistan

To, Date: August 2018

Minister of Finance,Government of Islamic Republic of AfghanistanKabul

Independent Auditors' Report on the Financial Statements

1. We have audited the accompanying statements of Cash Receipts and Payments (theF'inancial Statements-) of the Capacity Building and Results Facility Project bearing

World Bank ProJect ID number P123845 financed under Grant Number IT-01 1447(hereinafter referred to as the "Project") for the year ended 30 Qaws of Solar Year 1396(21 December 2016 to 21 December 2017), and a summary of significant accountingpolicies and other explanatory notes forming part of the Financial Statements.

The Ministry of Finance's Responsibility for the Financial Statements and Compliancewith Grant Agreement

2. The Ministry of Finance (the "Ministry") is responsible for preparation and fair presentationof the Financial Statements in accordance with International Public Sector AccoUntiIng-Standard "Financial Reporting under the Cash Basis of Accounting." This responsibilitVincludes designing, implementing arid maintaining internal control relevant to thepreparation and fair presentation of the financial statements which are free from materialmisstatement, whether due to fraud or error; selecting and applying appropriate accountingpolicies: and making accounting estimates that are reasonable in the circumstances.

3. In addition, the Ministry is also responsible for ensuring that the activities. financialtransact ions and in formation reflected in the financial statements are in com pl iance with theProject's Grant Agreement. The Grant Agreement Number TIF-0 I 1447dated January 212012 entered into between the Islamic Republic of Afghanistan and the InternationalDevelopment Association for the provision of USD One I lundred Million funding to theProject.

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Auditor's Responsibility

4. Our responsibility is to express an opinion on these Financial Statements based on our audit.We have conducted audit of the financial statements, project operations and related internalcontrols in accordance with International Standards of Supreme Audit Institutions("ISSAIs"). Those Standards require that SAO comply with ethical regulations and planand perform the audit to obtain reasonable assurance of the financial statements being freefrom material misstatement. Those standards require that SAO express its opinion onwhether the financial statements present fairly, in all material respects, the cash receipts andpayments of the project.

5. In addition to the responsibility to express an opinion on the financial statements describedabove, our responsibility includes expressing an opinion on whether the activities, financialtransactions and information reflected in the financial statements are, in all material respects,in compliance with the Project's Grant Agreement. This responsibility includes performingprocedures to obtain audit evidence about whether all payments and receipts are incompliance with the terms and conditions of Grant Agreement.

6. An audit involves performing procedures to obtain reasonable and appropriate auditevidence about the amounts and disclosures in the financial statements. The proceduresselected depend on the auditor's judgement, including the assessment of the risks of materialmisstatement of the financial statements, whether due to fraud or error. In making the riskassessments, internal controls relevant to the entity's preparation and presentation offinancial statements are considered in order to design audit procedures that are appropriatein the circumstances, but not for the purposes of expressing an opinion on the effectivenessof internal controls. An audit also includes evaluating the appropriateness of accountingpolicies used, the reasonableness of accounting estimates made by management, as well asevaluating the presentation ofthe financial statements.

7. We believe that the audit evidence we have obtained is reasonable and appropriate toprovide a basis for our opinion.

Opinion

8. In our opinion the Financial Statements present fairly, in all material respects, cash receiptsand payments of the Capacity Building and Results Facility Project bearing World BankProject ID number P123845 financed under Grant Number TF-01 1447for the year ended30 Qaws of Solar Year 1396 (21 December 2016 to 21 December 2017) in accordance withInternational Public Sector Accounting Standard "Financial Reporting under the CashBasis of Accounting."

9. In our opinion, in all material respects, the activities, financial transactions and informationreflected in the financial statements are in compliance with the terms and conditions ofProject's Grant Agreement.

10. Management Letter, attached to this Audit Report, highlights areas of improvement infinancial management including compliance with financial covenants of the Grant

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Agreements and of results of its operations for the 30 Qaws of Solar Year 1396 (21December 2016 to 21 December 2017). These observations and recommendations have

been communicated to and discussed with the Project and are intended to improve internalcontrols and result in other operating efficie o t e ct.

. Mo mmad Sharif SharifiAu r General of Afghanistan

Supreme Audit OfficeKabul, Afghanistan

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Islamic Republic of Afghanistan

Capacity Building for Results Facility Project(World Bank Reference: Project ID P123845; Grant ID 11447)

Financial Statements for the year ended

3 0 th Qaws 1396 ( 2 1st December, 2017)

Capacity Building for Results Facility ProjectW orld Bank Reference: Project ID P123845; Grant ID 11447

STATEMENT OF CASH RECEIPTS AND PAYMENTSFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

1396 1395 CumulativeTo Date

Receipts/ Receipts/Payments Payments

Controlled Controlledby entity by entity

USD USD USD

RECEIPTS

Initial Advance - 25,000,000

Replenishments 5,824,922 6,709,194 30,961,696

Taxes deducted to be transferred (20,344) 105,639 85.295

TOTAL RECEIPTS 5,804,578 6,814,833 56,046,991

PAYMENTS

Disbursement Category:Goods, Non-Consulting Servcies, Consultants' 17,708,686 10,095,996 49,352.680services, Payment of CBR's Recruits,Scholarships, Training & Workshops, IncrementalBank Charges 325 450 3,000

TOTAL PAYMENTS 17,709,011 10,096,446 49,355,680

Excess/(Deficit) of Receipts over Payment (11,904,433) (3,281,613) 6,691,311

Taminat (Net) 2,139 4,864

Increase/(Decrease) in Cash & Cash Equivalents (11,904,433) (3,279,474) 6,696,175

Cash and Cash Equivalaents at the beginning ofthe year 18,600,608 21,880.082

Increasel(Decrease) in Cash & Cash Equivalents (11,904,433) (3,279,474)

Cash and Cash Equivalents at the end of the year 6,696,175 18,600,608

The accompanying notes form an integral part of this financial statement.

Zahid HadaActing Peputy Ina oceMinistr of Finan Islamic ublic of Afghanistan

Dated: ugust12, 2018

Capacity Building for Results Facility Project(World Bank Reference: Project ID P123845; Grant 1D 11447)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

1) LEGAL STATUS AND ACTIVITY

a) The Capacity Building for Results Facility Project grant agreement was set up on January 21,

2012. The project's objective is to assist Government of Afghanistan in improving the capacity and

performance of select line ministries in carrying out their mandates and delivering services.

b) The project is funded by a grant bearing reference number 11447 from the Afghanistan

Reconstruction Trust Fund (ARTF) in the amount of United States Dollars (USD) 100,000,000.

c) The project consists of the following parts:

i) Technical Assistance for Preparation and Implementation of Line Ministry Capacity Building

programsii) Building Human Resourcesiii) Civil Service Trainingiv) Project management, Monitoring and Evaluation

d) The significant terms and conditions that determine or affect the availability of the funding

assistance are primarily the presentation of the eligible expenditures to donor within the period as

per and in accordance with the financing agreement.

e) These financial statements of the Project have been prepared in accordance with the requirements

of the Development Grant Agreement signed between the Government of the Islamic Republic of

Afghanistan and the International Development Association (acting as administrator of ARTF) in

January 2012.

2) SIGNIFICANT ACCOUNTING POLICIES

a) Basis of PreparationThe financial statements are prepared under the historical cost convention and in accordance with

Cash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued by

International Federation of Accountants (IFAC).

b) Reporting EntityThese financial statements are for the Project referred to in para 1(a) which is funded by the

grants as specified in para 1(b) and encompass the operations of the project to the extent funded

by those grants.

c) PaymentsPayments made from Special Account are recognised in the financial statements based on the

date the cheque is issued and direct payments by World Bank are recognised on the date on

which the withdrawal application for the payment is submitted to the World Bank. However,

cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are

reversed in the reporting period.

Capacity Building for Results Facility Project(World Bank Reference: Project ID P123845; Grant ID 11447)

d) Reporting CurrencyThe reporting currency is US Dollars. Since US Dollars is the principal disbursement currency of

the donor, the financial statements are not prepared in the Afghani which is the currency of

Afghanistan.

e) Currency translationsTransactions in currencies other than the reporting currency are translated into US Dollar at the

rate of exchange at which the transaction is actually executed.

3) NOTES TO ACCOUNTS

a) ReceiptsThese represent temporary loan received from government's own sources. This amount of such

temporary loan would be refunded in due course when the funds are received from the donor.

b) Bank ChargesThe Ministry of Finance has negotiated with Da Afghanistan Bank that bank charges will not be

charged on the transactions in the US Dollar Special bank account of the grant. Bank Charges

may be levied by intermediary banks on deposits into the Special Account and balances returned

to the World Bank.

c) Comparison of Budget and Actual Amounts

The Project, being the reporting entity for the purpose of these financial statements, in its capacity

as such does not make its annual approved budget publicly available nor is its budget explicitly

available publicly in the compiled approved budget in a manner purposeful to the context of these

financial statements. Thus, the requirement of presenting a comparison of budget and actual

amounts is not considered contextually applicable.

d) Authorisation Date

These Financial Statements are authorised by the Deputy Minister for Finance, Ministry of Finance

or any official acting on his behalf who has been so authorised to act on the date endorsed on the

Statement of Cash Receipts and Payments.

e) AppendicesThe accompanying appendices provide additional information and analysis and form an integral

part of these notes, except as indicated otherwise.

f) OthersThese Financial Statements are originally prepared in English and then translated into Dari. In the

event of any inconsistency between the English and Dari versions, the English version shall be

considered to be correct.

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX Al

SUMMARY OF WITHDRAWAL APPLICATIONSFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

Description Application Number Initial Advance Amount

USD USD

DA-A 120 819,047DA-A 119 628,779DA-A 114 308,275DA-A 115 421,063DA-A 118 345,020DA-A 117 212,980DA-A 113 444,720DA-A 116 175,065DA-A 112 399,143DA-A 111 149,718DA-A 110 418,957DA-A 109 1,321,178DA-A 108 180,977

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX A2

US Dollar SPECIAL ACCOUNT SUMMARYFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

Account No: 27442

Depository Bank: Da Afghanistan Bank (DAB)Address: Kabul

USD

Opening Balance as per Bank Statement 18,600,608

Add:Replenishment 5,824,922Expenses paid from other bank account 4,142

Total Additions 6,829,064

Deduct:Payments for Project Expenditure 17,729,030Bank Charges 325

Total Deductions 17,729,355

Closing Balance as per B.S 30 QAWS 1396 (21 DECEMBER 2017) 6,700,317

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX A3US DOLLAR SPECIAL ACCOUNT RECONCILIATION

FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

Account No: 27419Depository Bank: Da Afghanistan Bank (DAB)Address: Kabul

USD

Closing Balance as per bank statement - 30 QAWS 1396 (21 DECEMBER 2017) 6,700,317

Less:-Payments pertainig to this project made from other accounts (4T142)

Closing balance as per financial statements - 30 QAWS 1396 (21 DECEMBER 2017) 6,696,175

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX A4COMPONENT-WISE DISBURSEMENTS

FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)(not an integral part of the Financial Statements)

1395 1396 Cumulative

Project Component To Date

USD USD USDTechnical Assistance for Preparation and Implementation ofLine Ministry Capacity Building programs 1,254,256 1,697,229 9,809,460Building Human Resources 5,869,588 11,787,133 28,962,041Civil Service Training 231,333 184,726 939,361Project management, Monitoring and Evaluation 2,740,818 4,039,598 9,641,818

TOTAL PAYMENTS 10,095,996 17,708,686 49,352,680

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX A5STATEMENT OF ESTIMATED GRANT AMOUNT

FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)(Memorandum Statement - not an itegral part of the Financial Statements)

Amount

In currency of commitmentAmount of Grant USD 100,000,000Amount disbursed by World Bank untill the end of 13961 USD 55,961,696Undisbursed Balance USD 44,038,304

In reporting currencyAmount disbursed by World Bank untill the end of 1396' USD 55,961,696Equivalent US Dollars for undisbursed amount USD 44,038,304

Total estimated amount of Grant Funds available USD 100,000,000

Cumulative Payments for expenditure as per the Statement of Cash Receipts & Payments USD 49,355,680

1. Actual amounts of total disbursement made by the World Bank since the beginning of the project as available fromClient Connection